Getting a foot on the property ladder

It has never been easy to buy a house in Bermuda, but very few have regretted taking this bold step to freedom

For most of us, real estate is (as the saying goes) the biggest single purchase of our lives, and there are, without doubt, some of the biggest and most daunting decisions to be made that you will ever face.

The reality is that very few people are able to afford their dream home as first-time home buyers, so try to be pragmatic and think of your first home as just a first step. What’s important is that one way or another, you get started on the property ladder.

Renting vs buying

Let’s assume you’re now renting and planning to buy for the first time. A 20-year mortgage would enable you to own your home free and clear in 20 years.

Why take on such an onerous longterm commitment? For one thing, owning your home gives you control over your housing costs. If you’re renting now, you know that landlords like to raise their rents every year.

Meanwhile, mortgage payments remain stable, even if your monthly mortgage will probably be higher than the monthly rent on a comparable property for the first few years.

Owning a home also confers another distinct advantage: if necessary, you can sell it and collect the profit. But really, a house is much more than an investment — it’s your home. There are many wonderful feelings that come with owning a home. You gain control over your lifestyle. You will never have to move because a landlord is selling the building or raising the rent or doesn’t like your pets or your children. And you will have something meaningful to give to your children.

Just like with any other investment, ignore short-term ebbs and flows in value. Building your equity is a slow process. But you can decorate or improve your property any way you wish. And unlike a tenant, you benefit from the improvements you make: wise upgrades make the home more valuable. You will likely recoup most of the expense in the form of profit when you sell.

Building equity

In addition to pure price appreciation, you enjoy other financial benefits from owning your own home. One of the most important is the build-up of equity. Equity is the difference between the value of your home and the balance still payable on your mortgage.

Your equity builds each time you pay off on your mortgage. Part of every mortgage payment is applied toward reducing the mortgage principal. As you gradually reduce the outstanding loan balance, your equity increases. It also increases as the value of your house appreciates.

It’s actually a form of savings. Instead of putting money in a savings account, you are saving it in your home.

As such, it can be used as collateral for all kinds of further borrowing, such as making home improvements.

Want a bargain? Then read on… Prices have always been high for nice places in the central parishes. There is an ever-diminishing supply and a never-diminishing demand, therefore prices go up. So, broaden your search, and look at properties in Somerset or St. George’s. We suspect that you might stumble upon a pleasant surprise or two.

The fast ferries make commuting from the West End quick and convenient, and if you talk to anyone who lives in St. George’s or St. David’s they will tell you how wonderful it is to live in the East End.

Fixer-uppers and run-down properties can sometimes seem like bargains but be wary and ensure you go into any transaction to purchase such a property with your eyes wide open. Unless you can do the bulk of the fixing up yourself, they can be too much trouble, and that trouble may be deeper than it looks. Expert advice is essential.

Another issue is that lending institutions are more likely to say yes to a property in reasonable condition. It means that if the worst came to the worst, they could sell it without too much difficulty whereas a half-finished fixer-upper would probably remain a liability.